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One of the best benefits to filing for bankruptcy is that you will be granted an automatic stay that can give you time in order to deal with your debt by stopping your creditors from being able to collect debts. Like the name implies, an automatic stay is something that happens automatically when you file for bankruptcy.
Automatic stays are designed to give the Court the time to work through your bankruptcy, that means you will get additional time to deal with your debt situation. Automatic stays can apply to all sorts of things, from utility shut offs to preventing evictions. If you are considering filing for bankruptcy, make sure you know all the benefits of getting an automatic stay.
This article provides an overview about automatic stays and bankruptcy. You will learn what an automatic stay is, what kinds of things it can apply to, and other benefits of getting an automatic stay.
Bankruptcy and automatic stay basics
An automatic stay is a freeze on all collection activity put on by the Court when you file for bankruptcy. When you file for bankruptcy there will be a freeze put on all outstanding civil lawsuits relating to debt collection. Additionally, there may be stoppages to any utility disconnections, eviction, or foreclosure proceedings.
Automatic stays are designed in order to give the Court time to figure out your bankruptcy. Automatic stays do not get rid of your debts, but they may give you the time you need in order to figure out a way to deal with your debt situation. Sometimes, people file for bankruptcy strategically in order to take advantage of automatic stays.
You should keep in mind that one of the key benefits of filing for bankruptcy is the added time you get because of the automatic stay the Court will impose. You should also know that depending on what kind of bankruptcy you file for, there may be differences in the kinds of automatic stays you can get. You will not get an automatic stay for new debts you incur after your bankruptcy is first filed.↑ Back to top
What kinds of things can you get an automatic stay on?
Automatic stays can apply to all sorts of things from utility shutoffs to eviction proceedings. Depending on the type of bankruptcy you file for, different kinds of debt may be eligible for an automatic stay.
Utilities, bankruptcy, and automatic stays
Filing for Chapter 7 bankruptcy will put an automatic stay on utility shutoffs.
Within 20 days you must provide “adequate assurance” to the utility company that you will be able to pay future bills. In some situations, you may have to give your utility company a deposit against future payments. If you do not provide “adequate assurance” to your utility company they may terminate their service.
There are many different ways you can provide “adequate assurance” to your utility company. You will have to negotiate with your specific utility company, but generally speaking utilities accept letter of credit, cash deposits, surety bonds, or prepayment.
Foreclosure, bankruptcy, and automatic stays
The biggest advantage to dealing with foreclosure by filing for bankruptcy is that you can get more time in order to deal with the foreclosure. When you file for bankruptcy, the court will put an automatic stay on any ongoing foreclosure proceedings. Generally, that means there will be a three to four month window where foreclosure proceedings will be put on hold so the Court can evaluate your bankruptcy case.
It should be noted that your creditor will have an opportunity to challenge a potential stay on foreclosure proceedings. Be prepared to respond if your creditor decides to ask the court to lift the automatic stay. If you do not, then foreclosure proceedings may begin again.
You should keep in mind the type of bankruptcy you are filing for when thinking about getting an automatic stay to deal with foreclosure.
If you file for Chapter 13 bankruptcy you may be better able to save your home from a potential foreclosure. Many people file for Chapter 13 bankruptcy for strategic reasons in order to delay foreclosure proceedings. Filing for Chapter 13 bankruptcy may buy you a lot of time, in some cases years, to deal with foreclosure.
You should keep in mind that even though Chapter 13 bankruptcy may give you a lot of time to deal with your foreclosure, you will still likely have to agree to a payment plan with your creditor. If you manage to meet those payments, you may be able to keep your home safe from foreclosure.
Similarly, filing for bankruptcy may give you an automatic stay on any ongoing eviction proceedings. Your landlord will be able to fight against the automatic stay, but you may be able to use the time in order to negotiate with them or find another place to live.
Other things you can get an automatic stay on
In addition to debt repayment, if you may be able to get an automatic stay on any wage garnishment that was issued in other proceedings. Wage garnishment is when a Court orders that a portion of your paycheck be automatically taken and given to your creditor.
However, when you file for bankruptcy wage garnishment will temporarily stop. The Court will grant an automatic stay, which should mean you get the entirety of your paycheck just as if your wages were never garnished in the first place. In some situations, you can even get back what you previously paid due to wage garnishment.↑ Back to top
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What isn’t protected by an automatic stay
Some kinds of debt you might have are not protected from an automatic stay. Generally, these are kinds of debt you might owe to the government or because of legal action. You should check to see what kind of debt you have to see if it can qualify for an automatic stay.
First, certain tax proceedings do not qualify for an automatic stay when you file for bankruptcy. That means if you have a great deal of unpaid tax debt you will still be liable even when you file for bankruptcy. Luckily, there are other resources online that can help you deal with unpaid tax debt via bankruptcy.
Second, if you owe money for outstanding child support payments then you can not get an automatic stay by filing for bankruptcy. In general, child support payments are exempted from many of bankruptcy benefits. If your debt is largely outstanding child support you will likely have to pursue an option other than bankruptcy.
Third, you cannot get an automatic stay on any debt you have for outstanding criminal fines. You will still have to pay any criminal fines as normal. Tax, child support, and criminal fines are the main categories of debt that are not granted an automatic stay. If the kind of debt you have is not one of the above, you will likely be granted an automatic stay, giving you time sort out your situation.↑ Back to top
Creditor challenges to bankruptcy automatic stays
Keep in mind that your creditor may try to remove any automatic stays that you get when filing for bankruptcy.
You should also know that you may lose your automatic stay if you repeatedly file for bankruptcy. If you filed for bankruptcy within the past year, your automatic stay may be reduced to only 30 days. If you filed for bankruptcy more than once in the past year, the court will likely not order an automatic stay in the first place.↑ Back to top
If filing a Chapter 7 bankruptcy case seems like a good solution for your debt problems, request additional information from Upsolve. We are a non-profit organization whose mission is to assist low-income families throughout the United States who are in financial distress.
Whether you’re filing with an attorney, legal aid, or on your own with a service like Upsolve, Chapter 7 bankruptcy can be a great way to help you get a fresh start. We love what we do, and we want to help you and your family become debt-free.↑ Back to top